Where is All My Money Going?

The following is a guest post. Enjoy! 

“Where is All My Money Going?”

If the title looked at all familiar, you’ve struggled with the all too familiar problem of making ends meet. Most people live in this state at one time or another. There’s nothing wrong with that. The problem is, some people live this way their entire lives, which should be avoided if at all possible. Some of the conditions which lead to this lifestyle are unavoidable. But most, I’m sorry to say, just aren’t. If you don’t know where all of your money goes, it’s time, my friends, to make a budget.

A budget is all about active money management. Management isn’t easy for everyone. It can be hard to tell other people what to do, and to make consequences happen if they don’t or don’t want to. But it’s even harder for most people to manage themselves. It’s an uncomfortable task to look at one’s own life and identify personal behaviors which are creating problems for yourself and others. Creating a budget is an exercise in doing just that. And even though it’s not fun for most, it’s important and it’s the only way you’ll get ahead in your financial life.

Before you start a spreadsheet, it’s important to look closely at your bank statements from the last couple of months. Go over them with a fine toothed comb, and take note of any unexpected events. See any surprises? If you’re not used to looking at your finances on the regular, you’ll probably find at least a few. The first surprise is a payment that you make that you didn’t know you’re making. PPI is an example: a kind of insurance that was tacked onto mortgage applications in the UK. People paid for it for years before they found out they were doing so, in many cases. Other people will have automated payments for services they no longer use, or for subscriptions they’ve forgotten about. First things first, kill off all these unnecessary payments.

Now look at everything you’ve spent over the previous month for food, entertainment, housing, and other important categories. Be merciless and give yourself a specific total figure. This can be painful, because most people spend a lot more for things like food than they previously thought. You don’t want to spend more than 20-30% of your monthly income on food. If you’re way over that amount (as many people are), you’ve got to make some changes.

For the next couple of months, keep your spending to levels which are well beneath that which you bring in from salary and other earning opportunities. Keep up this behavior for a long time and you’ll find that your money isn’t so tight after all. But to begin this process, it’s essential to look at these behaviors closely. Without close scrutiny, you’ll only have a general idea of what you’re spending and where, at best. If you don’t get specific you won’t be able to ask the question in our title, not really.

4 Common Excuses For Not Enrolling In Your Company’s FSA

The following is a guest post by James Yeung. James is a full-time software developer and a part-time Flexible Spending Account enthusiast. You can follow his adventures in trying to squeeze the most out of his FSA at FSATips.com. Enjoy! 

I will take it for granted that the savvy readers of this blog are motivated money-savers. The folks here are the types who want to take charge of their financial journeys, but are also willing to put in a little effort to reach their goals. So perhaps my message today is just preaching to the choir; Nevertheless, it never ceases to amaze me what excuses people will give for leaving hard-earned money on the table.

Let’s take that health Flexible Spending Account, for example. You know, the one that is offered by your employer, which allows you to put away some of your pre-tax earnings to spend on eligible health-related products and services?

If you are already enrolled in one from your employer, congratulations, you understand the power of effectively getting a huge discount on goods that you may already purchase frequently. And if you are not, I want to use this opportunity to read your mind with 4 excuses that you are most likely harboring.

Excuse # 1 – FSAs are complicated, and I don’t get it

Just try to take a moment to understand it. You first decide any amount (up to $2,550 for 2015-2016) to contribute to your FSA account based on your estimate as to how much you or any family member might need for medical expenses that coming year. Your employer deducts a pro-rated amount (before taxes) from each of your paychecks and straight into your FSA, until it reaches the total amount you designated. Then starting from the benefit year, whenever you pay for a “qualified” medical expense used by anyone in your family, you’ll pay from your FSA account. (You’ll use an account-linked debit card, OR pay out-of-pocket up front and get reimbursed from your FSA later). Notice your FSA was funded by your salary before Uncle Sam takes his portion (taxed), which is the reason all of this is magic and worth your while. Your savings depends on what tax bracket your salary puts you in, but given the typical range of 20% to 40% for federal income tax, it’s sure worth it. There are rules to what qualifies as a medical expense, yes, sometimes it can be a drag to submit reimbursements. But like anything, if you learn the rules, it will become easy to save money.

Excuse # 2 – It’s just not worth the hassle of dealing with the paperwork

Let’s say I give you $2550 to put in either a savings account, the stock market, or an FSA for one year. Depending on your tax bracket, FSAs will guarantee a 20% to 40% return. If you can guarantee that on Wall Street, you’ll probably have a ton of wealthy clients wanting to invest with you. And let’s not even mention how that trounces the pitiful interest rates on savings accounts these days. So suppose your tax bracket is at 30% of your income. If you designate the max $2550 in your FSA and use it all up on qualified expenses, you’ll have a return of $765 this year. Is that worth learning how to use your FSA and navigate the documentation? It sure has been for me. Plus, it’s become easier to deal with reimbursements through FSA debit cards that reduces a lot of paperwork.

Excuse # 3 – Look, I don’t have enough medical expenses to bother

It’s probably like many of us to underestimate what we’ll spend on medical, dental and vision expenses.

But think for a minute: If you might see a doctor, dentist, or get an eye exam this year, know that your co-pay qualifies as an FSA expense. Wear contacts? Your pricey disposable contacts and contact solution (yea even the fancy kind that bubbles/oxidizes) is FSA-worthy. Want that latest pair of Warby Parker eye-glass frames this year? Thanks, FSA. How about that unplanned (aren’t they all) cavity that needs filling? You might have a pretty high deductible to pay to your dental insurance. Well, your FSA will relieve some of that pain by paying for it with its pre-tax goodness. You get the gist. Think of it as getting a 20% to 40% discount (again, depending on your tax bracket) on all this FSA-qualified stuff you already pay for on a regular basis.

Be sure, however, to check your FSA administrator’s guidelines for which eligible items require a doctor’s prescription and which do not. It’s not intuitive at all, for example: Contacts solution do not require a prescription, while over-the-counter drugs such as aspirin, allergy, cold/sinus, antacids, and laxatives DO require a doctor’s prescription to be eligible. The rules can seem arbitrary, so check your FSA guidelines or online resources.

Excuse # 4 – All sounds great, but I’ll end up losing what I haven’t used by the end of the year! 

The much-feared “Use-It-or-Lose-It” rule USED to be a legitimate reason that scared folks off from using an FSA. Mainly because funds you didn’t use in the allotted benefit year expired and went straight to your employer’s pockets. But starting in 2014, the IRS decided to allow employers to either allow up to $500 of unused balance to rollover to the following year, OR offer a grace period (typically 2 and a half months). Great, huh? But even if your employer is really mean and doesn’t offer either of these, a little planning should give you confidence that you’ll be able to use up every penny of your contribution.

Convinced yet? My hope is that you will invest a little effort and give that FSA a shot this year. Luckily, there are more and more wonderful communities online, like this My Personal Finance Journey blog, to support you. Just remember, during this open-enrollment season with your employer, give the health Flexible Spending Account a chance to save you some hard-earned money!

How about you all? Do you currently take advantage of an FSA through your employer? If so, what do you like or dislike the most about it? 

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/84335369@N00/7543295456/in/photolist-4rBa75-dSK3tm-8BNp8N-cuzmWd

The Introvert’s Guide to Negotiating Car Sales

The following is a guest post by Kat Tretina. Kat is a freelance writer who became obsessed with personal finance after realizing how ridiculous her student loans were. She has her own site at www.ktretina.com. Enjoy! 

When you’re an introvert, the thought of negotiating on anything can be terrifying. Facing off against a car salesman ranks up there with undergoing a root canal without anesthesia. But if you don’t negotiate, you will end up paying thousands more. Luckily for introverts, there is a way to negotiate effectively and get a great deal, without leaving your home. You’ll be in and out of the dealer within a half hour driving your new car.

We’ll cover the process so that you will be prepared for your next car purchase.

Do Your Research

This plan only works if you know what you want. If you think you want a sedan but aren’t sure what make or model, this process won’t work. You need to have a specific car in mind. Go onto sites like Kelley Blue Book to see what other people in your area have paid for the model you’re looking for. Kelley Blue Book will show you what a great deal looks compared to a poor one. This will give you a gauge of what to shoot for during negotiations.

For this example, we’ll use a basic Nissan Versa (see below for screenshot). From this you can see that MSPR is 12,835, but people are not paying close to that. Instead, a fair price is considered to be between $11,573-$12,182, with the average at $11,878. We’ll be looking to beat that.

Plan Your Targets

Next, find dealers in your area that stock the car you want that have a decent reputation. I recommend identifying at least 5-10 dealers. Then pour yourself a cup of coffee and get ready to spend some time on email.

Send each dealer a note with this script:

“Hi there,

I am interested in buying the 2016 Nissan Versa, model S. I will definitely be buying it one way or another on Saturday, but I’m looking for the best deal in the area. Can you tell me what your best out-the-door price is—inclusive of all fees?”

You will get very prompt responses. Some will try to call you; tell them you prefer to keep things over email. Others will try to talk about monthly payments or financing and some will decline to negotiate over email at all, so scratch them off the list. But several will get back to you with a price. Go over each offer to ensure the price is inclusive of all fees.

Once you have a few offers, send a note to each dealer in turn. Tell them what the best offer is and ask them if they can beat it:

“Hi there,

City Nissan said they can give me the Versa for $11,800 with everything included; can you give me a better deal?”

At that point, some dealers will bow out. But others will come back with a lower offer, in which case you repeat the process again with the other dealers until everyone has bottomed out. At that point, you should be at the lowest end—or even lower—than the best price Kelley Blue Book listed.

Time to Pick Up Your Car

From there it’s very easy. Let the dealer know you’re on your way so they can clean up the car, print off the email with the final price you agreed to and stroll into the dealership. Show whoever comes to help you the email and they will connect you with their sales manager.

If they try to change anything you agreed upon—if they claim the car isn’t in stock, they have a similar model with certain upgrades, etc—you are to stand by that email and walk out if necessary. You have an offer in print, so this rarely happens at reputable dealers, but you should be prepared in case of surprises.

Once you know the car you want at the price you agreed on is there and ready, then you can discuss financing options if needed. Again, be careful here that they stick to the out-the-door price you agreed on and ensure they don’t add on extended warranties or service packages. Keep saying no until all of the paperwork is done.

With all of the negotiation and prep work out of the way, you should be in and out of the dealership with your new car in less than an hour. Congratulations! Despite a desire to hide from negotiations, you successfully argued down the price and got a great deal. This is a great way to buy a car without the hassle and stress of a high-pressure salesman.

How about you all? What have you found is the best approach for negotiating when  buying a car?

Share your experiences by commenting below! 

Tips To Help Students Own Holiday Shopping On A Budget

As most students can relate, having extra cash to throw around for Christmas gifts is often just a pipe dream.  It’s hard enough getting by on a part time job or work study income as it is, but when you toss needing to get Christmas gifts for friends and family into the mix, it can become almost as stressful as having to study for finals!

According to the recent Discover Annual Holiday Survey, spending on holiday gifts is predicted to rise this year.  Interestingly, the way that millennials, many of whom are college students, choose to shop for holiday gifts is markedly different than their older counterparts.  Specifically, more than half of millennials reported that they would do all of their shopping online, compared with only 42% of older shoppers.  Additionally, nearly 3 out of 4 millennials said they would use their smartphones or tablets to do their holiday shopping, while only 1 out of 3 non-millennials reported doing the same.

With all this extra spending predicted and the ease in which millennials (and others) have in purchasing their gifts online or using their smart devices, it’s important to remember to stick to a budget that you can afford.  You can still get presents for your loved ones even on a student’s meager budget, without hurting your credit or losing your mind!

Here are just a few tips:

1. Create a holiday shopping budget:

It’s important to have a budget in place for all of your expenses in general, even if the holidays weren’t just around the corner.  Take your income in consideration, as well as bills or other financial obligations you have on a regular basis.  Then, determine how much is left over for you to possibly use for gifts for others during the holiday season.  Just remember, ideally you’ll want to pay your bill in full at the end of the cycle, so make sure you budget accordingly!

That being said, try to consolidate a little bit if you can:  if you have a sibling with a spouse, consider just getting one gift for the couple instead of an individual gift for each.  Similarly, don’t bother getting gifts for your pets if you have any!  Discover’s Annual Holiday Survey found that 37% of respondents planned on spending at least $50 on their dog, while 27% said they’d spend that much on their cat.  Dogs and cats have no idea that it’s the holiday season, nor do they even understand the concept of gift giving, so save your money and leave them off of your list this year!

2. Use a credit card where you get cash back for your purchases:

This one is a no-brainer!  If you’re going to be spending money, why not use a credit card that gives you cash back for all of your purchases?  You can then use that extra money to help pay your bill.  The Discover it chrome for Students card gives you 1% cash back on all your purchases, as well as 2% cash back on gas and at restaurants.  Additionally, you can use this cash back to pay for items on Amazon, which is a great place to buy all of your holiday gifts at once!

3. Do-it-yourself!:

Often, the best gifts are made by hand and cost very little compared to what it would be to buy someone a brand new commercially-made present.  Making the gift yourself also gives a sentimental and personal touch, which a lot of people appreciate.

The most important thing when it comes to your holiday shopping is to make a budget, stick to it and always pay your bills on time (and in full if possible).  By following these tips you’ll be well on your way to a stress-free (or at least less stressful!) holiday season.

Disclosure: I am a paid brand Blogger for Discover Financial Services My views are my own and do not necessarily reflect the views of Discover Financial Services and its affiliates.

Money-Saving Tips for the Best College Christmas Gifts

The following is a guest post by Savanna O’Conner. Enjoy!

Oh, Christmas, our joy and our wallets’ curse! No matter how much you love Christmas, it is almost impossible to ignore the fact that the winter holidays can be quite hurtful to our budgets. From the Christmas tree to the gifts and the dinner, everything can end up costing quite a lot of money. If you haven’t been thorough enough with your budget planning, you may find yourself scraping the bottom of the barrel – even more so if you’re a college student and your budget is limited.

So, how do you survive the Christmas season without turning from Santa Red to Sadness Blue? How do you offer gifts that are meaningful and budget-friendly?

Believe it or not, this is not Mission Impossible: The Winter Edition. It is doable, and achieving gift greatness will keep Christmas spirits higher than the Old Man’s reindeer-drawn sleigh.

Jingle your creativity, because your budget-friendly presents are going to be amazingly awesome!

Start Early

No, really, start early. The sooner you begin searching for gift ideas, the more time you will have to decide what presents your friends and relatives will genuinely love.

Not only that, but you will also have a better chance of saving money on gifts: running for the perfect present on Christmas Eve is not just exhausting, but it can be very pricy too. According to statistics released in 2014 by CreditCards.com, you are much more likely to over-spend when you are in a negative state – angry, for example, that you can’t find anything. It’s equally probable that you will over-spend when you’re in a good mood too, if you are overcome by Christmas spirit.

Add this to the fact that everything in supermarkets and stores is gorgeously arranged to tempt you to buy more during the holiday season, so you will almost definitely spend too much if you procrastinate on your gift buying plans.

Ready, Set, Hunt!

…for special offers, obviously!

The good news about the holiday season is that it starts with Thanksgiving. While this may be yet another holiday that pushes us to over-spend, you can use its aftermath the smart way – by keeping your eyes peeled for offers on Black Friday and Cyber Monday.

If you have a particular gift in mind (which may be a little over your budget), stay put and connect yourself to the aforementioned commercial events. You can get huge discounts on great products – and amaze your friends and family with gifts they will really enjoy.

This is not to say that you should buy everything you see on discount. Stay focused and hunt for those specific products you want to buy for Christmas – try to stay away from special offers you weren’t actually looking for.

Let Them Choose the Gift

Gift cards are an amazing way to save money and time, as well as making sure your Christmas gift will be warmly welcomed.

As long as you know that the recipient would buy from company “X”, giving them a gift card for its products will be more than well-received. Here are some ideas you could consider:

• A Netflix gift card.
  • We all have that friend – the one who binge-watches TV shows and movies online. So why not provide him/her with the chance to do it completely free for the upcoming months?
• An airline gift card.
  • Offering airline gift cards may sound like an awfully expensive thing to do, but here’s the trick: many airline companies accept credit card reward points/travel points, which you can use to buy gift cards from them. And there are many credit cards with special offers on reward points and travel points (Harvard Card, Venture from Capital One and BankAmericard Travel Rewards Credit Card, to name a few).
• A gift card for their favorite store.
  • If your friend or relative likes shopping in a particular store, they would be more than happy to use a gift card there. This way, they can choose to spend the money on whatever products they want.
• An Amazon gift card.
  • We all know that Amazon is the wonderland of everything you could ever need. So if you aren’t certain as to what someone would like, offering them this means the world is their oyster in terms of online shopping options.

Do It Yourself

Can you bake, sew, glue or knit?

If so, perfect – Pinterest is there to provide you with an almost infinite number of ideas! From the fanciest cake recipes to the cutest sweaters, the Internet can give you inspiration for just about anything you might be able to do with your own hands.

This type of gift works for people who are closer to you. They will appreciate the effort you’ve put into crafting a present from scratch. Plus, you know what they like and dislike, so you know what types of things they would enjoy more.

The key to making beautiful DIY gifts lies in making sure they are useful, unique and appealing. Avoid boring things people could easily buy from the store (e.g. a pair of handmade white socks). Don’t make presents people will never use (e.g. a crocheted photo frame). Last, but not least, don’t offer DIY gifts that are flawed or haven’t turned out as planned (e.g. a sweater that is smaller than you wanted it).

Be creative – not having the help of Santa’s reindeer and elves is the only limit when it comes to giving gifts that are appreciated and affordable! Have a Merry Christmas and a Happily Wealthy New Year!

How about you all? Do you have a college student on your Christmas gift list? What do you have in mind to get them?

Share your experiences by commenting below! 

***Photo courtesy of https://www.flickr.com/photos/mattnazario/13971207088/in/

Most Ridiculous Myths About Structured Settlement Markets

The following post is a guest post. Enjoy! 

Just like any other financial and legal instrument, there are numerous rumors and myths that float around about structured settlements. These myths only result in creating complete and utter confusion in the minds of those who are considering selling their structured settlements. If you are one of those people who are absolutely unsure of whether to go ahead with a structured settlement sale or not, here are a few myths about structured settlements markets we have busted for you.

Lawyers and attorneys should avoid recommending structured settlements to their clients as they are bound to cash out

It is a common misconception among lawyers, attorneys and even structured settlement payment recipients that lawyers should avoid recommending structured settlements to their clients as they are most likely to cash it out. On the contrary, it is a proven fact that an estimated 95% of structured settlement recipients avoid selling their structured settlement payments. It is only in a situation where the circumstances of the receiver drastically change from the time of the settlement that he or she may consider cashing out. So lawyers must urge clients to get structured settlements. By becoming a recipient of a structured settlement the client will also acquire guaranteed financial security.

If a recipient cashes out his structured settlement he is liable to pay tax on the lump sum amount

This is yet another misconception that people have in their minds. If your structured settlement payments are tax free, then he is not liable to pay tax on the lump sum amount when you cash out. The recipient is only liable to pay tax on the lump sum cash amount when his structured settlement is also taxable.

The court doesn’t carefully scrutinize the case before giving an approval

Some people believe that the court approves almost all cash outs without scrutinizing the case carefully. This is an absolutely ridiculous myth about structured settlements. Invariably, purchasers of structured settlements only take up deals that are more likely to get court approval. If the structured settlement purchase company has a strong reason to believe that the court will not give an approval to cash out, the company will not take up the case.

Companies that purchase structured settlements and the overall structured settlement industry are unregulated.

This is another major misconception that even lawyers and financial analysts have about structured settlements purchasing industry. Contrary to popular belief, companies that purchase structured settlements are subject to numerous taxation as well as other laws. Both the court as well as the income tax bodies thoroughly scrutinize the case before approval. Even if the structured settlement purchase company has complied with all the laws, if the court has reasons to believe that the transaction is not in the best interest of the annuitant, the court will not approve the application. Further the purchasing company will be liable to pay all the direct and indirect expenses such as filing fees, attorney costs, etc. Additionally if there is ever a situation wherein the purchase company does not comply with the law, they will be liable to pay heavy fines and penalties.

So if you had any doubts and hesitations about the structured settlement industry to countless myths that have floated around, you needn’t stress anymore. The structured settlement industry is a properly regulated industry that always aims at working in the best interest of the annuitant. So before you take any decision on cashing out your structured settlement please ask your attorney to clarify all the misconceptions and doubts you may have.

Winter Driving Tips

Winter time has come once again to us in the Northern Hemisphere!  All that snow may look pretty from the comfort of your home, but now is as good a time as any to remind you that driving in the stuff can be dangerous if you don’t take precautions.

There are a lot of ways you can prevent (or significantly decrease your chances of) getting into an accident in the winter, which includes the following steps:

• When accelerating or decelerating, do so slowly. No need to step on the gas or the breaks hard in the winter—if you do, you’ll be much more likely to skid out of control.
• Keep your following distance longer than you would on dry roads. You should increase the distance between you and the car in front of you to 8-10 seconds, instead of the usual 3-4 seconds on dry roads.
• Try to avoid powering up a hill. Stepping on the gas hard to get up a hill can cause skidding/slipping in the snow, so getting a little inertia going before you hit the hill so you have a “running start” would be better.
• Don’t stop going up a hill. Once you stop on the uphill in the snow/ice, it’ll be very tough to get going again without skidding/slipping.

What happens to your insurance if you do get in an accident because of snowy weather?

Hopefully, it never happens to you, but let’s say you do get into an accident during a snowstorm or other bad winter weather.  Say you’re coming up to a stop light but because of the snowy weather you skid into the car waiting just in front of you.  Is it your fault?  Or the weather’s fault?  How will your insurance be affected?

Well, unfortunately, there is almost always someone at fault, and it’s almost always not the weather.  According to most auto insurance companies, it is the driver’s responsibility to adjust his/her driving to avoid an accident in inclement weather, and if you do happen to skid into another car, it’s likely your fault since you should have known to take steps X, Y, and Z to avoid it in the first place.

If you are deemed at-fault in the accident, you can always fight the ruling, though simply citing the weather as the culprit likely won’t get you very far.

Depending upon your particular insurance, your premiums could go up after the accident, leaving you to not only pay for the damages done but also more out of pocket every month as a result.

The best thing you can do to avoid getting into an accident and having your insurance premiums go up is to follow safe winter driving practices and learn all you can about adjusting your driving habits when you go out in the snow.  Ideally, if you are able to just stay put instead of driving that would be the best thing, but if you have to drive in the snow, learn how to do so safely to avoid an accident.

Advice For Investing In Bitcoin: 4 Tips

The following is a guest post. Enjoy! 

The purchase and storage of Bitcoin has become a major factor for investors who manage their own accounts online. Despite widespread skepticism as to the digital currency’s place in the future, its persistent relevance is beginning to speak for itself. Bitcoin may or may not become the mainstream currency alternative advocates have long predicted it to be, but it is already a significant investable resource poised to gain greater influence in the years ahead.

However, as a relatively new concept traded digitally and operating with an uncertain future, Bitcoin poses unique challenges to investors. So here are four of the best tips I’ve gathered for how to handle investment in the crypto-currency.

Treat Bitcoin As A Long-Term Play

I would argue that this is the most significant tip to keep in mind if you are considering adding a stash of Bitcoin to your portfolio. Said famed billionaire investor Reid Hoffman on the topic, “When I invest, I think, ‘What is the way the world should be and is this investment part of that end?’…. So that’s minimum five years. When it comes to Bitcoin, that’s the framework that I think about it in.” This quote was part an Entrepreneur feature in which Hoffman was interviewed about his interest in Bitcoin. While the advice was meant in a more general sense, it’s a very important concept to keep in mind with regard to Bitcoin. This is one investment in which day-to-day fluctuations should not be a major concern, because you’re in it for the long-term.

Prepare For Volatile Fluctuation

As an add-on to the initial point about looking at Bitcoin as a long-term play, anyone looking to invest in the crypto-currency should be prepared for volatile fluctuations in day-to-day prices. As explained in an article on the history of Bitcoin, “Because Bitcoin is still a relatively small market in comparison with existing models, the market price of Bitcoins may go up or down in response to relatively insignificant amounts of money … This means that fluctuations in the price of Bitcoin can be quite volatile.” Simply put, Bitcoin is still small enough to be significantly affected by major purchases or sales, and investors should understand this and not be alarmed.

Don’t Predict – Analyze

This is actually a tip I’m borrowing from a Financial post featuring their five favorite quotes about investment. Specifically, the tip came from Ben Graham: “The individual investor should act consistently as an investor and not as a speculator.” In other words, act based on facts and real analysis, rather than predictions, hopes, or hunches. This is important advice regarding any sort of investment, but it is particularly significant with regard to something like Bitcoin, which is still in its infancy and attached to a great deal of passion and lofty expectations. There are fewer facts and pieces of genuine data available when dealing with a new or young resource, and investors must take care to heed real information.

Research Platform Potential

Regarding actual data that can be useful in making decisions about Bitcoin investment, consider the potential of the crypto-currency as a foundation for additional platforms. Venturebeat addressed this idea in an article encouraging readers to consider Bitcoin, specifically with regard to the common comparison of the currency to digital payment service PayPal. “Bitcoin can be used for this service,” the article acknowledged, “but it can also implement new and innovative financial services. The protocol allows for a significant degree of programmability…”

In other words, don’t think of Bitcoin solely as a currency or payment service, but as a technology with multiple potential applications that have not yet been realized. As additional platforms are created and new services and companies take advantage of Bitcoin, the currency itself will gain value. So, when investing, look to concrete data about emerging platforms and functionality for indications of performance.

Like any other financial transaction, investing in Bitcoin is a personal decision, and must be approached with regard to each individual’s particular situation. But for those considering a move in this sector, these bits of advice can help to clarify the market.

4 Reasons A Line Of Credit Is NOT A Good Emergency Fund

The following post is by MPFJ staff writer Travis, who blogs at Enemy of Debt where he candidly shares his family’s financial struggles, failures and successes. As a father and husband, he provides a unique perspective on balancing debt, finances, and family.

The subject line on the email read, “Be prepared for the unexpected.” The email from my bank was a solicitation for a line of credit. The email tried to convince me to click on the link to the online application by describing the line of credit as a way to be prepared for all those little unexpected things life throws your way.   What my bank was suggesting is that I use a line of credit as my emergency fund.

Having a line of credit for an emergency fund is a terrible idea for several reasons:

1. Used For More Than Unexpected Expenses

The marketing material claims that the bank is trying to help its customers be prepared for the unexpected with a line of credit.  I think it’s fairly obvious that they have a different motivation behind the product for a couple of different reasons:

• Credit Limit: The standard statement is that a $1000 emergency fund will handle 90% of all unexpected expenses.  The credit limit range for the offered line of credit is $3000 to $100,000.  Except for a medical crisis, I can’t think of a single unexpected expense that would cost $100,000.  Even in that case, I certainly wouldn’t be using a line of credit with a high interest rate to pay for it.

• Profitability : Banks make their money from customers paying interest when they carry a balance from month to month.  Unexpected expenses are by definition infrequent.  If the line of credit was truly meant to be a simply for unexpected expenses, use of the account would be infrequent, and most of the time be for a relatively small amount of money that could hopefully be paid off quickly.  These scenarios would not be a big money maker for the bank.

My bank is trying to get me to apply for a line of credit hoping I’ll use it for much more than the occasional unexpected expense.  With a potentially large line of credit, they’re hoping I use it for everyday use or for things much more grand such as home renovations or vacations.

2. Promotes Financial Laziness

A person building up an emergency fund must exhibit two very important financial behaviors:

• Regulate Spending : A emergency fund can only be built if a person spends less than the amount of money left over after paying all bills.  This is best accomplished through paying yourself first.  Or in other words, making savings a part of your required budget, ensuring that money is directed towards savings from each and every paycheck.

• Emergency Funds Are Off limits : Once a significant amount of money has been built up in an emergency fund, there is a temptation to use it to buy something instead.  To be fully prepared for an unexpected expense, a person has to practice financial self control to not touch those funds.

Depending on a line of credit as an emergency fund when a financial crisis arises requires neither of these behaviors.  It allows a person to spend every penny they have with reckless abandon.  It allows a person to live without planning financially for the future, with the perspective of dealing with any unexpected expenses if and when they arise.

3. Extends The Crisis

If a fully funded emergency fund is in place, not only can the unexpected expense be paid in full,  but the structure is already in place in that person’s financial behavior to begin to rebuild it.  The unexpected expense is taken care of, and a financial crisis is avoided.

A person with a line of credit for an emergency fund has not practiced the planning and self-control needed to build an emergency fund for unexpected expenses.  The expense is financed using the line of credit. They now have the difficult task of reducing their lifestyle to make line of credit payments for an indeterminate amount of time.  If only the minimum payment is made each month, it could take years to put the financial crisis fully behind them

4. Increases Cost Of The Crisis

Currently, most personal lines of credit have an interest rate of 10 to 12 percent.  Interest will start to accumulate immediately, increasing the overall cost of the financial crisis each month it takes to pay off the line of credit.  If at any time a payment is missed or late, the interest rate will likely be increased causing the cost of the unexpected expense to grow even more.

It really comes down to how a person wants to handle unexpected expenses.  A person can either be proactive, or reactive.  Using a line of credit as an emergency fund falls under the category of being reactive.  Such a methodology trades financial responsibility now, for budgetary and financial turmoil when an actual unexpected expense happens later.

How about you all? Do you have a line of credit as your emergency fund?

Share your experiences by commenting below! 

***Image courtesy of Stuart Miles at FreeDigitalPhotos.net

How your accounting business can bill for higher-value services

The following is a guest post. Enjoy! 

As accountants, we all want the same thing — more work and more money. It’s rare for people to get into the accounting business because they’re passionate about accounting. Rather, they understand it can be a profitable business that allows them to enjoy some of the finer things in life.

Now, for some accountants today, they’re satisfied with their existing clients and the level of work they provide. Most accounting businesses deal with compliance accounting — making sure tax laws are being followed and that the books are being balanced.

But some of us strive for more. We want to be more efficient. We want to take on more clients. And we want to bill more for high-value services. In the end, this means for money, but it also means a little more work.

With some help from technology, however, it may not be as hard as you think.

Understanding the goal

Your whole team needs to understand how to bill for higher value services. This means moving beyond spreadsheets and helping businesses make important decisions.

• It requires a cultural change. You now need to think outside the box. While the old way of doing business is a great foundation, it needs to serve as a springboard into what’s truly important: services that do more than report what businesses are up to, and rather, help business move forward and grow.

• Research some technology options. Share that information with the rest of your firm.

• Start creating some estimates to show your team how much money could honestly be made off this idea.

Transition can be difficult

Mapping out the future is easier than actually doing it. Once you’re in a groove, it’s tough to go against the grain, but it’s a necessity if you want to make more money.

A couple of key steps can make everything easier:

• Go with a cloud-based system that allows you to work from anywhere and allow all data from you and the client collaborate under one umbrella.

• Don’t be too change-happy. Change is good, but you don’t want to ruin the great foundation your business has already started.

• When building a rate structure, make sure to mix it up. Tier your services, showing clients and potential clients that you’re versatile and can offer anything they may need.

Understand client demands

Technology has sped up the world and clients have become more demanding. They want cloud technology for all client services in order to have an easy way of monitoring their accounts.

You need to aim for the top. Whenever you think you’re going above and beyond for our client, push a little harder.

Be part of the “modern accounting revolution.” It’s not easy, but it’s unavoidable. You need to work extremely hard in order to win clients and honestly, make your work more interesting.